Gold Price Per Ounce

In this article, we take a look at what "gold price per ounce" means, factors that affect the gold price per ounce, where gold is bought and sold and what types of gold are available.

Traditionally, gold has been recognised as a safe investment. If the stock markets or housing markets take a dive, the gold market tends to keep or even increase in value. One of the reasons for this is that gold is a rare metal with very desirable properties which make it very durable and in demand. Gold cannot be printed like paper money, or depreciate in value like property can over time.

Definition of Gold Price Per Ounce:
When people mention "gold price per ounce", they are talking about a Troy ounce. A Troy ounce is a unit of measurement that is traditionally associated with weighing precious metals such as gold or silver. A Troy ounce is equal to approximately 1.097 ounces or 31.103 grams.

What is the history of the price of gold?
The price of gold has increased since records began; with some fluctuations over the years mainly due to supply and demand. The following graph shows the price of gold per ounce (in US Dollars) from 1968-2006. Notice that the price of gold actually overtakes the US Dollar rate in 2006:

What types of gold are available on the open market?

Gold Bullion
Gold bullion is traditionally the way that large banks and investors purchase and store gold. Investors use gold bullion to diversify their investments, protect their wealth and preserve their purchasing power. The industry standard for trading and storage is the 10 ounce bullion bar of .995 purity. Each bullion bar is hallmarked by a refiner in order to certify its weight and purity. The gold price per ounce of bullion depends on the purity and weight of the gold.

Gold Coins
Gold coins are bought and sold on the market and are generally purchased as an investment. Buyers are able to purchase many gold coins based on a price which is close to the market gold price per ounce. The price of a gold coin may be influenced by the rarity of the coin.

Scrap Gold
The price of scrap gold depends only on the actual content of gold in the metal. Therefore the gold price per ounce of scrap gold tends to change directly in line with the price that gold is trading at on the open market.

Factors affecting the gold price per ounce:
The gold price per ounce is decided by supply and demand on the open market and therefore is affected by hoarding and disposal of gold. This is because most of the gold that has ever been taken out of the gold mines is still in existence and when the right market price comes along the gold can potentially be bought and sold. There are three main factors which affect the gold price per ounce:

1. Bank Failures
Because gold is a physical commodity there is less risk attached to owning it. If a person holds money in a bank there is risk that if the bank goes bankrupt they can lose their money. Because of this, when the possibility of a bank going bankrupt increases people take their money out of the bank and buy gold - which pushes up the gold price per ounce.

2. Low or negative real interest rates
Where the return on bonds, shares and property is not high enough to cover the risk of ownership and inflation levels, people move their money out of these investments and put it into gold and other commodities. This demand pushes up the gold price per ounce. In the 1970's when there was a period of stagflation this was very common.

3. War, Invasion, Looting, Crisis
As previously discussed, gold is a solid asset which holds its value very well. If there is a period of turbulence and a person fears that their assets may be taken from them or become worthless, then they are likely to want to sell them and purchase gold which increases the gold price per ounce.

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